Scarborough council surprised by misuse of $700,000 in federal funds by local schools

SCARBOROUGH, Maine — The likely loss of $1.2 million in state general purpose school aid has been evident since Superintendent George Entwistle III introduced the fiscal year 2014 budget on March 13.

What town councilors say was not known until after they approved a second school budget on June 5 is that $706,000 of the subsidy loss is the result of a one-time deduction stemming from what a state education official said was improper use of federal Jobs Bill money to pay bus drivers in fiscal year 2012.

When and how Town Council Chairman Ron Ahlquist, Vice Chairwoman Judy Roy and Councilor Richard Sullivan found out the source of more than 50 percent of the entire state subsidy reduction is now a source of concern, if not irritation.

“If there is a problem like that we expect that the School Board or superintendent would communicate that,” Ahlquist said Tuesday.

Entwistle said Thursday that details of how subsidy losses occurred were presented during budget discussions.

“I specifically recall [School Board member] Chris Caiazzo saying the subsidy reduction was significant, that it was driven by valuation and because of the impact of the Jobs Bill,” Entwistle said.

More to the point, Entwistle and Kate Bolton, director of business and finance for the School Department, said the question of disclosure exemplifies the complexity of explaining the education budget and how it is affected by state Department of Education decisions.

“No one can make heads or tail of [EPS], even the DOE,” Entwistle said.

A $38.8 million school budget was approved by voters, 1,490 to 1,332, on June 11. It was the second referendum on the spending plan, after a budget that was $54,000 larger was rejected at the polls May 14.

The referendums came after several joint workshops between finance committees of the council and School Board, led by Roy as chairwoman of the council finance committee.

School Board Chairwoman Christine Massengill and Caiazzo, chairman of the finance committee, said Wednesday that board members did discuss how state subsidy formulas were reducing the general purpose aid derived from the Essential Services and Programs model.

“It wasn’t delved into deeper, but those weren’t the questions we were getting asked,” Caiazzo said. “I thought we were as clear as possible. There was certainly no intention of misguiding or misleading.”

Roy said she did not remember anyone from the School Department or Board of Education elaborating on the cause of some of the subsidy loss.

“I think we should have been made aware of it,” she said Tuesday.

Massengill said details about subsidy reductions were available to councilors.

“They could have asked us, too,” she said. “In no way did we mean to mislead anybody.”

James Rier, deputy commissioner of the DOE, said the deduction in the transportation operations component of the EPS formula occurred because of the School Department’s reporting of expenditures of state aid in the category for fiscal year 2012.

He said the school department benefited from extra funding two years ago by accepting a state subsidy and using federal money for the same purpose.

“It was a really great decision at the time,” Bolton said. “The guidance on all the federal funding that came down was really sketchy.”

When school districts were informed of aid projections in February, Rier said Bolton contacted him to see how the funding, which used data from fiscal year 2012 for fiscal year 2014 aid calculations, could be restored.

Massengill and Caiazzo met with Rier, Education Commissioner Stephen Bowen and state Rep. Amy Volk, R-Scarborough, on March 18 to plead the district’s case, but Rier said he had no choice in the matter.

“There’s nothing we can do, it would have been a violation of the federal Jobs Act,” Rier said last week. “It was a way they chose to use the funds.”

Entwistle praised Massengill and Caiazzo for striving to get a more equitable share of subsidies and reforming the EPS structure. The meeting with Rier came after Caiazzo testified in Augusta at an Appropriations Committee hearing on the flaws of the state education funding formula.

Massengill and Caiazzo were not School Board members when the decision was made to use Jobs Bill funds, and Entwistle had yet to take over from former Superintendent David Doyle. Board members and councilors said they believe the spending decision was approved by the DOE and all proper procedures were followed by the School Department.

Bolton and Entwistle noted the substance of workshop discussions surrounded expenditures, because the School Department can do more about spending than revenue streams.

“It was water under the bridge, I don’t think it was in the forefront of everybody’s minds,” Entwistle said.

Ahlquist said knowledge of the nature of the subsidy reductions would have affected his approach to the school budget process. Ahlquist, Sullivan and Roy said they learned of Rier’s decision from Volk, after a June 5 council meeting where the second-effort education budget passed by a 6-1 vote.

“It certainly would have raised an eyebrow for us,” Ahlquist said. “I would certainly questioned it, and I would want somebody to scrutinize the school budget.”

Councilors make the final determination on annual education spending, but have no say on individual line items. Before the first education budget was forwarded to the May 14 referendum, councilors reduced it by $623,500.

Roy suggested the cuts should come mostly by eliminating budgeted pension contributions that would become a local, instead of state, responsibility in the biennial state budget introduced by Gov. Paul LePage.

No state budget has been approved yet, but the $6.3 billion biennial budget approved by the Legislature contains a requirement for local districts to pick up pension obligations now funded by the state. If enacted, it would require the School Department to find as much as $524,000 more than the $38.8 million voters approved last week.

Ahlquist said the School Board should look internally before approaching councilors for any more money.

“This council is not in the mood for raising taxes for anybody,” Ahlquist said. “We think we have been very supportive and very generous.”